SAO PAULO Aug 13 (Reuters) - Brazilian federal police on
Thursday announced they executed 10 search and seizure warrants
and arrested an attorney in a scheme they said siphoned
government funds via fraudlent contracts with Brazil's planning
and budget ministry.

Police told a press conference they arrested attorney
Alexandre Romano, an ex-city councilman with the ruling Worker's
Party in Sao Paulo state, after uncovering evidence of ministry
funds diverted from a ministry payroll contact through last
month.

Federal agent Igor Romário de Paula said Romano's
involvement was the first sign in a 17-month-old bribery and
money-laundering investigation that law firms in Brazil had been
used to divert money from public coffers.

The corruption probe, Brazil's most extensive ever, is
broadening from an investigation of contracts at state-run oil
firm Petroleo Brasileiro SA, or Petrobras.
Investigators are also looking into a nuclear power project
overseen my state-run utility Eletrobras and have
investigated allegations of fraud involving the health ministry.

Police said more than 50 million reais ($14 million) had
been illicitly obtained from a payroll loan contract with the
planning ministry. The ministry's role is still under
investigation, but a former human relations director is
suspected of taking bribes according to police.

A planning ministry spokesman said the ministry had not been
notified of the operation and therefore had no comment.

Romano had been identified as a potential money launderer in
an operation on Aug. 3 that jailed Jose Dirceu, one of the most
senior members of the Workers' Party detained so far.

Prosecutors said Romano had received transfers from the
scheme including one for 300,000 reais in July.

"There is an audacity in people continuing to practice
crimes in the middle of this investigation," said prosecutor
Robson Henrique Pozzobon.